November 16, 2017, Carlos Calma, Senior Housing News - The third quarter of 2017 proved to be a very busy time for mergers and acquisitions (M&A) in the seniors housing space, as seniors housing accounted for $1.5 billion of the total $5 billion in overall transactions volume for the quarter, according to a blog post from the National Investment Center for Seniors Housing & Care (NIC).
Nursing care accounted for the remainder ($3.5 billion) of the overall total.
The total seniors housing and care deal volume in the third quarter was up 129% from the second quarter’s $2.2 billion, and up 6% in a year-over-year analysis, when volume totaled $4.7 billion.
Bullish public buyers
In recent years, public buyers—specifically those that are publicly traded in equity markets—have been gun-shy, according to NIC Senior Principal Bill Kauffman, author of the blog post.
“Since the end of 2015, the public buyers, especially publicly traded real estate investment trusts (REITs), have been relatively quiet in terms of dollar volume,” Kauffman explained.
This was not the case in the third quarter, however, as they were more bullish. Public buyer volume increased dramatically, up 733% from the second quarter. In monetary values, public buyer activity registered $2.9 billion in closed transactions in the third quarter of 2017, compared to $345 million in the second quarter of 2017.
Analysts would have to track back to the second quarter of 2015 to see a similar performance by public buyers, when $5.6 billion of volume closed, according to Kauffman.
Public buyer volume in the third quarter of 2017 also increased over the third quarter of 2016, when $1.4 billion was registered.
“The main reason for this jump in volume was the large Sabra/Care Capital Properties deal that closed in the third quarter,” Kauffman said. “This deal represented $2.1 billion of the $2.9 billion public volume, and included 331 skilled nursing properties.”
In addition to this transaction, Kauffman also highlighted Omega’s purchase of 15 skilled nursing properties from Kindred for approximately $200 million. Further, Kauffman noted Sabra’s purchase of a seniors housing and care portfolio for $430 million from North American Health Care.
Institutional and private buyers more active
Deals facilitated by institutional buyers also increased significantly from the prior quarter, according to Kauffman.
Volume within this category increased 225% from $275 million in the second quarter of 2017, to $896 million in the third quarter of 2017.
However, institutional volume was down 49% in a year-over-year analysis.
A deal closed by Kayne Anderson, the institutional alternative investment manager, which bought a $633 million portfolio from Sentio Healthcare Properties, which consisted of 32 seniors housing and care properties, was another transaction Kauffman highlighted.
In broader strokes, a longer-term trend of institutional buyers growing their shares of the seniors housing and care transaction market, as public buyers have been less aggressive, Kauffman noted.
“In 2015, institutional buyers represented 15% of total transaction volume, which increased to 30% of volume in 2016. Institutional volume is now at 32% at the third quarter mark in 2017,” he wrote.
In comparison, public buyers represented 53% of the transaction volume in 2015 and now represent 31% as of the latest data set through the third quarter of 2017.
However, private buyers have been consistent, representing a “steady volume” of transactions, with a 31% representation in 2015 and 34% share as of the latest data.
Private buyers have been consistently above $1 billion of closed transactions each quarter for the last four years, according to Kauffman’s blog post. The private buyer volume dropped 23% in the third quarter from the prior quarter; however, it once again came in at $1 billion or more at $1.1 billion in the third quarter. When compared to the same quarter last year, the volume also dropped 23% from $1.5 billion.